On 1/1/20, Gimmel Corp issued $400,000 face value, 8%, 10 yearbonds. The effective interest rate on that date was 6%. Interest payment dates are 6/30 and 12/31 of each year. On 4/30/21, the bonds were retired at 110 plus accrued interest. Gimmel uses the effective interest method.

INSTRUCTIONS

A) Determine the issue price of the bonds and prepare a journal entry for their issuance on 1/1/20.

B) Prepare journal entries for payment of interest and for amortization on 6/30/20 and 12/31/20.

C) Prepare journal entries for the retirement of the bonds on 4/30/21.